Risk management

The Piaggio Group has launched an Enterprise Risk Management (ERM) project, which is designed to facilitate the definition and implementation of a structured and integrated system for the detection, measurement and management of business risks, in line with the existing best practices on this subject. As part of the 2017 Risk Assessment campaign, which involved company managers from across the entire Group, a total of 129 risk scenarios were identified. These were then divided into 26 categories, which in turn were placed into 4 first-level macro-categories (External, Operative, Financial and Strategic Risks). Issues relating to environmental and social themes and to staff, human rights and the fight against corruption (as detailed below) were also examined in detail as part of this process.

Environment

The subject under analysis in this instance regards the actual and potential repercussions of the Group's operations on the environment; these repercussions have been assessed in consideration of key aspects, such as: atmospheric emissions, waste management practices, use and protection of natural resources, etc.

Greenhouse gases (mainly CO2) and Volatile Organic Compounds (VOCs) released by solvents used in painting operations are of particular relevance when examining the levels of air pollution generated by automotive operators. The structural operations implemented in past years at the Group's production plants have led to reductions in polluting emissions at some of these, while at others, levels of these emissions have remained stable.

Despite the fact that Piaggio's production sites were originally designed to run on energy sources from fossil fuels, the Group is engaged in optimising the management of existing sites to limit consumption as far as possible.

Land reclamation and decontamination activities have proven necessary, due to historical contaminants found at the various sites: the polluting agents discovered had not been used by the plants for several decades, a fact which testifies to the historical nature of this issue. No other cases of soil contamination (spills or other significant polluting events) have ever affected the Group's activities.

Finally, it should be noted that Piaggio is in possession of ISO 140001 environmental certification, and invests every year in measures to reduce the environmental impact of its production sites.

Despite the significant inherent risk present, in line with other companies in the sector, the control measures in place serve to limit environmental risk to a smaller and less significant area.

Employees

Risks relating to employees include all aspects linked to improper management of the Group's human capital, including areas such as career management, the remuneration and training system, diversity (age, gender, sexual orientation, disability, religion, ethnic origins etc.), as well as risks related to health and safety in the workplace and to trade union and labour relations.

Piaggio operates on a global scale, with employees in Europe, America and Asia. The company promotes diversity in all areas, with regard to gender, age, nationality, ethnic origin, ideology and religious faith, in the belief that this represents the different approaches to pursuing and achieving the highest levels of performance within a unique and broader organisational design model for the Group. The insertion and integration of disabled people into the workforce is also made possible in practical terms by the high levels of accessibility offered by company facilities, as well as by the existence of a company procedure regarding this issue.

Piaggio adopts a system of recruitment, development and salary packages for personnel which recognises and rewards merit and performance. Development tools are designed to build and continuously improve skills, while enhancing potential and evaluating and rewarding excellent performance. Reward policies are implemented to reward people and their contributions to the Group, in line with the criteria of competitiveness, fairness and meritocracy. The various control mechanisms described above enable the risks linked to these aspects to be reduced to a residual level of no real significance.

The Piaggio Group acknowledges the role of trade union organisations and workers' representatives, and is committed to establishing relations with these groups, with a focus on attention, dialogue and the quest for shared understanding; indeed, a process of verification and continuous dialogue is key in identifying the best solutions for the company's specific needs. For these reasons, the frequency of strikes is reduced, despite the high rate of unionisation among employees.

With reference to Health and Safety at Work, the activity which presents the highest level of risk is the testing of motorbikes with medium-sized and large engines. In general, the risk of accident/injury suffered by personnel is mitigated through the constant adaptation and updating of processes and the adoption of procedures and structures that comply with current legislation on employee safety, and with the highest international standards. The Group also promotes safe individual behaviour through targeted training initiatives.

Social

Risks which arise within the social dimension generally relate to the relationship between Piaggio and its customers, as well as the effects that the company has on the local community.

With regard to the first of these, it has emerged that the quality and reliability of products is an essential and determining factor in meeting customer requirements and guaranteeing safety. Within the "Product - Operational Risks" category, risk scenarios related to potential product faults or defects have been mapped. To mitigate these risks, Piaggio has implemented a Quality Control system, and performs extensive tests on products at different stages of the production process, carefully selecting suppliers on the basis of stringent technical and professional standards. In addition, the Group's attention and dedication to obtaining and maintaining certification for quality management systems at global level (ISO 9001 or ISO/TS 16949) should also be noted.

Human rights

As set forth in the Code of Ethics, which has been in force since 2004, Piaggio explicitly prohibits any form of discrimination and forced labour. This Code has been widely distributed among all Group subsidiaries, and serves to clearly and transparently establish the principles and values which inspire the entire organisation.

In accordance with their relevance and in consideration of the specific features of the Indian market, a number of regulations are currently in force: as of December 2016, the Code of Business Conduct & Ethics and the Whistle Blower Policy were introduced, with the latter expressly intended to protect and safeguard those who report alleged violations of the Code (accordingly, this policy also serves to ensure that the Code is fully effective); a policy on the "Prevention of Sexual Harassment of Women in the Workplace", to prevent episodes of sexual harassment inside the plant.

In virtue of the prevention and control mechanisms established within the Code of Ethics and implemented across all Group affiliates, no risk scenarios relating to the violation of human rights have been reported.

Fighting against corruption

The issue of the fight against both active and passive corruption falls within the "Internal/external offences" category of the risk model implemented by the Group. Within its Code of Ethics, Piaggio expressly prohibits any act of corruption, including requests for and/or of bestowal of favourable treatment, collusive behaviour, and/or solicitation (whether direct, indirect and/or through third parties) of personal advantages of any kind for one's own benefit or for that of others, including material benefits and/or any other advantage of any type in favour of a third party or parties.

A series of processes, procedures, roles and responsibilities has been established in order to facilitate the achievement the aforementioned objective, with regard to negotiations/commercial relations with public administration bodies and with private entities.

The general environment and checks/controls briefly described above reduce risks relating to episodes of active/passive corruption to a negligible residual level.

For a more detailed analysis of all the risks identified by the Piaggio Group, refer to the Report on Operations in the 2017 Consolidated Financial Statements.